pricing veterinary services for the iaep 2016
TRANSCRIPT
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Pricing Veterinary Services
Mike Pownall, DVM, MBAwww.slideshare.net/mpownall
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Veterinary Pricing
3
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Competitive
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• Annual
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• 30 Responses• 61% Raised Prices within 1 year• 9% Average Increase
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We’re Not Alone
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>50 %
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3-8 %
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Prove It
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What is Good Pricing?
Doing the same, or less, but giving more value to the customer and more profit to the business
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What is Good Pricing?
Encourages client behavior that benefits both client, business, and pet
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2.6 5.3
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Pricing Challenges
1% vs 10%
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1% Price Increase
$5000
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10% Price Decrease
$50,000
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Freemium
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Freemium
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Loss Leaders
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Penetration Pricing
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Dynamic Pricing
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Dynamic Pricing
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Variable Pricing
Fortune.com April 29, 2014
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Monthly Fees
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Pay for Performance
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Full Price Transparency
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Comparative Pricing
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Price Elasticity
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…change in price affects demand...
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Price Elasticity
• 89% of horse owners would tolerate 10% price increase
• 77% would tolerate 20%• 73% feel fees are low compared to
value of horses
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Dynamic Pricingin
Vet Med?
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Dentistry Promotion
No Call FeeFebruary only
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164% increase in dentistry
45% increase in extras
93% increase in billing9% Discount
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6% New Clients
10% increase in dentistry over next 3 months
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Strategy & Pricing
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What is Strategy?A description of how we identify what our clients value and how we can deliver it by competing with a sustainable advantage
over our competitors
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Value
Value = benefit to client - cost
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Client Value
UPSTREAM DOWNSTREAM
VALUE
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Client Value
UPSTREAM DOWNSTREAM
VALUE
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Client Value
UPSTREAM DOWNSTREAM
VALUE
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Clients
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everytable.com
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The Loyalty Effect
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What is a Loyal Customer?
• Engages the practice frequently• Has a positive attitude about the practice• Recommends the practice to friends and
colleagues• Less price sensitive
More Profitable
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Probability of Buying
Loyal Clients 60% - 70%
Lost Clients 20% - 40%
Prospective Client 5% - 20%
Source: The Loyalty Effect and Loyalty Rules by Frederick Reichheld
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Drivers of Client Loyalty
4
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AttitudeCustomer/Patient Focused
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Customer Experience Perceived quality
Purchasing processSupportive & caring staff
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Brand ImageIndustry Leader
TrustworthyInnovative
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Perceived Value Product Service
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Pricing & Customer Loyalty
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Hard Benefits
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Soft Benefits
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Bundled Pricing
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Customer 1Willing to
Pay
Customer 2Willing to
PayExpected Sales Most Likely
Service 1 $18 $12At $18 will sell 1
At $12 will sell 2
$12
$24
Service 2 $17 $21At $21 will sell 1
At $17 will sell 2
$17
$34
BundledPrice
$35$0
$33$66
$29$58
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5%
off all services & meds in year
Paid in Full by March 31Account must be current
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50%
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$99/Year2 day free shipping
Video, song and book accessUnlimited photo storage
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Shop more – 2xSpend More – 40%
Membership is increasing – 50%
Why??
uk.businessinsider.com 10/21/15
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What do We Sell?
Knowledge in units of time
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TDABC
Time Driven Activity Based Costing
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TDABC
• Labor• Fixed Costs• Cost of Equipment
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TDABC
• Cost per minute of labor• Cost per X-ray, Ultrasound,
etc• Cost per mile
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Cost of Goods Sold
Only sell with a transaction
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Payroll
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Labor
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Payroll
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Payroll
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Payroll
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Operating Expenses&
Vehicle
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Digital Radiographs
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Digital Radiographs
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Digital Radiographs
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Digital Radiographs
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Total Costs
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Client Type• New• Single horse• Multi horse• CC on file• Bad Payer
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Client Type TimeNew 10 Min
Existing 5 MinSingle Horse Same Drive
Multi Horse Same DriveCC on File 10 MinBad Payer 60 Min
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Example #1• New single horse owner• Rides for pleasure• CC on file• 30 minute drive• 20 miles one way• 30 min exam for “Swollen Eye”
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Total Time = 90 minutesVet - 90 x $0.75 = $67.50Tech - 90 x $0.42 = $37.80CSR - 20 x $0.31 = $6.20Total labor Cost = $111.50Driving - 40 km x $0.41 = $16.40Transaction Cost = $24.91Total Cost = $152.81
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Swollen EyeProfit for basic eye exam
$0
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Lameness Workups• 4 horses at trainer barn• Absent owners
• 2 have credit cards • 2 are new clients with no info
• 30 minute drive• 20 miles away• 1.5 hour visit• 8 X-rays total
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Total Time = 150 minutesVet - 150 x $0.75 = $112.50Tech - 150 x $0.42 = $63.00CSR - 2 x 15 x $0.31 = $9.30
- 2 x 60 x $0.31= $34.10Total labor Cost = $218.90
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Driving - 40 miles x $0.41 = $16.40Transactions - 4 x $24.91 = $99.64X-Ray Cost - 8 x $25.28 = $202.24Total Cost = $537.18
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Lameness ExamsProfit for 4 Lameness Exams
$164
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What is Good Pricing
Doing the same, or less, but giving more value to customer
and more profit to business
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What is Good Pricing?
Encourages client behavior that benefits both client,
businessand horse
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Dynamic Pricing
Incentivize through scheduling
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Swollen Eye$0 Profit
2.5 hours of vet work = no profit5 hours of driving = no billing
7.5 hours & no profit15% of vet time
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What if….
Bundled 5 calls togetherReduce Call Fee by
50% ?
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For Example2 hour total drive time rather than 5
$70 x 5 hours = $350$70 x 2 hours = $140 Saving $210
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Reduced Call Fee EffectCall fee = $60
5 calls x $60 = $300
5 reduced call fees = $150$210 - $150 = $60 Profit
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Swollen Eye2.5 hours of vet work = $60 Profit
2 hours of driving = no billing
4% of vet time
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Reduced Call Fee Effect3 extra hours in week @$192/hour156 extra hours in year = $29,952
6% increase in sales• Lowered vet & tech cost• Lowered transaction cost• Increased profit• Happy & loyal clients
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EfficienciesClient typeCODBetter schedulingBetter use of HR
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Dynamic PricingTime of year• DentistryLocations • Reduced call fee
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Measuring Client Loyaty
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The Net Promoter Score
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Past Customer Surveys
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Useless
• Inconvenient• Intrusive• Annoying• Nothing measureable• <10% response rate
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The NPS
• Promoters (9-10)• Passives (7-8)• Detractors (0-6)
Promoters – Detractors = NPS
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The NPS• Promoters (9-10) 30%• Passives (7-8) 60%• Detractors (0-6) 10%
Promoters – Detractors = NPS30%(P) – 10%(D) = 20% NPS
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Good Profit vs Bad Profit
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The NPS
• 4 questions• constantcontact.com• Surveymonkey.com• Target clients• Results shared
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Results
• Ave NPS score = 84%• Ave response rate = 33%
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Challenges
• Time• Repeating clients• No industry standard
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100 Pennies• Insurance• Accounting/Legal• Facility• Equipment Repair• Telephones• Bad Debt
• Inventory• Vet/Tech Wages• Office Wages• Advertising• Vehicles• Benefits
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Profit??
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Inventory
23%
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Vet/Tech Wages
33.6%
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Office Wages
14%
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Advertising
1.3%
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Vehicles
3%
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Benefits
1%
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Accounting/Legal
1%
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Facility
5%
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Equipment Repair
.07%
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Telephone
1%
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Bad Debt
.05%
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Profit??
8.5%
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Pricing Tips • Strategy• Discount carefully• Train staff• Log complaints• Measure• Be creative
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• www.oculusinsights.net
www.slideshare.net/mpownall